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How Real Estate Investing Budgets Go Bad: Avoiding the Money Pit

Real estate investing is exciting and profitable but can also be challenging and scary. How do you know which properties will return your investment? How do you know if you’re spending too much time working on deals, or if you should cut back? We all know what happens when you overspend on a home renovation project; the costs spiral out of control. That’s why real estate investing budgets are so important. Learn what budgeting errors can turn a flip upside down and how to avoid them.

Money Tracking Helps Avoid Pitfalls

Before you start investing, be prepared to track both your monthly holding costs and your renovation costs with a spreadsheet. Start with the Renovation budget as a guide and then add columns for the additional monthly costs that are outside of the renovation (insurance, utilities, etc.) By tracking these data points right away, you will immediately begin to protect your budget and your investments.

Know Your Margins

We see so many excited real estate investors jump on properties with profit margins so tight that the investment could become a series of disasters. Build a spreadsheet to help you determine what your bottom line profit goal should be for every property before diving into a new project. A great sales price is not the only factor you should consider when making your purchase. That means no sight-unseen purchases! Here are some of the factors that can impact your bottom line to help you more thoroughly plan every cost before you invest,

  • Overpaying for a home that doesn’t have value
  • Not executing a thorough walk-through with your project manager
  • Underestimating your construction expenses
  • Forgetting to calculate your carrying costs into your budget

Understanding your margins also means you keep an eye on the final price point of your flip. If your house is the most expensive in the neighborhood or you’ve spent way too much money and you’re not getting the returned value, that can be a big financial loss. Your profitability is directly impacted by comparable home sales near your location. This kind of due diligence safeguards your profitability and business growth. 

Estimate Operating Costs

There are operating costs associated with any real estate investment that you can’t avoid. These costs include property taxes, home insurance, renovation costs, permitting fees, HOA dues, utilities, and loan interest. You need to have a budget for these costs so that you don’t run out of money especially if there’s a major crisis with the property. Additionally, you need to be aware of what kind of insurance your home requires. Are you in a flood zone? What other kinds of natural disasters do you need to protect your investment from? When it comes to your renovation costs, have you factored in plumbing, electrical, architectural drawings, structural repairs and maintenance, landscaping, and not only permits but the time your city or town takes to issue approval?  

So, not only are you tracking expenses and tracking your cash flow, but you’re also budgeting for taxes and insurance. That’s a lot to track! Pro-tip, consider utilizing a real estate investing software program. Be sure to look for a program that can help you manage your cash flow and track expenses including taxes and insurance.

Teamwork Makes the Dream Work

Who you work with will dramatically affect how well you do in your real estate investing business!  

Working with a traditional bank might make you feel more secure in your transaction. But, in many cases, you will have a unique project that’s well outside of their traditional lending scope and you’ll be stuck without funding. Solution? Find a team of hard money lenders who have personal experience flipping homes, have millions of dollars in private funding to offer you, and can tailor the loan to each of your unique situations.

You think you’ll save money by taking on several of the construction elements of your fix and flip projects. In many cases, it is just the opposite. The best way you can spend your time is to focus on your cash flow, expenses, and business growth. Hiring reliable trustworthy construction professionals is key to real estate investing success. We have an entire article dedicated to giving you advice on finding the best general contractor here

Have your team in place before you begin your next project!

  • General contractor
  • Title agent
  • Real estate attorney
  • Hard money lender
  • Architect and/or engineer

Let’s Get Your Projects Funded the Right Way

To succeed as a real estate investor, you need to track every part of your projects to help prevent you from any major losses. Working with a hard money lender who has an in-house construction expert and combined experience of more than 50 years in the industry with 40+ successful fix and flip projects of their own is the best place to start. From fast and transparent lending to construction advice and budget reviews, our team is here to direct and guide you through successful renovations. We bring the power of multi-million dollar financing with the local, small-town respect and honesty you deserve. Call us at 856-422-3232 or send us a message – let’s get you funded today!

Builders Trust Capital Client Success Stories

Partner with an efficient, personable team who has delivered $160,000,000 in real estate loans

Builders Trust Capital Success Story Photo: 1185 Route 9 South, Cape May Courthouse, NJ
  • Purchased $185,000
  • Rehab $150,000
  • ARV $475,000
  • Fix & Flip Philadelphia, PA
Builders Trust Capital Success Story Photo: 10 Anderson, Morristown NJ
  • Purchased $1,675,000
  • Rehab $450,000
  • ARV $3,955,000
  • Fix & Flip Cape May, NJ
Builders Trust Capital Success Story Photo: 10 Anderson, Morristown NJ
  • Purchased $550,000
  • Rehab $208,286
  • ARV $1,005,000
  • Fix & Flip Haddonfield, NJ

How to Finance Your Real Estate Investment

Our process is simple! We handle the entire loan process in-house. Loans are closed in as little as 10 business days.

Get Started

Fill in the form or call us at 856-422-3232 so we can contact you and begin working on your loan. We're local and happy to meet with you to learn your funding needs.

Pre-qualify

Complete your application and provide supporting documentation.

Proof of Funds

Increase your buying power with a proof of funds (POF) letter.

Loan Processing

Your appraisal and title work are ordered. Your application documents are reviewed. Our in-house processing team will contact you with any questions or additional documentation required.

Get Funded Now

After underwriting is complete, we make sure your closing docs are ready at the table and funds are disbursed timely so you can start your work without delay.

Testimonials

Photo of Alexandra Petruchenya

I appreciate your team's support during the entire rehab process for my property. This is my first deal, there were a lot of unknowns that came with that. The construction process intimidated me and held me back from doing real estate for several years. Kurt has been phenomenal, he was a wealth of knowledge. I appreciate how he gets in touch to talk through in-scope item completion and aligning on ways to ensure my construction draws are adequate. I'm thankful to have someone who has my business's best interests at heart.

Alexandra Petruchenya recommends Builders Trust Capital Oct. 2021
Photo of Sharina Jackson

I recently completed a cash-out refinance transaction with Builders Trust Capital. I would like to say thank you to Anthony for your partnership during this process, your excellent customer service and professionalism made the process easy for me.

Sharina Jackson recommends Builders Trust Capital Oct. 2021
Photo of Raphael Akinsete

If you are a newbie investor, I highly recommend Builders Trust Capital because your first few deals will impact your outlook on real estate investment. If you are a seasoned investor, I also recommend the company as they now offer products for both quick flips and long holds. This way you are covered in both your entry and exit strategy. As a longtime client of Builders Trust Capital I can testify that they are the real deal and there are genuinely good people behind this business.

Raphael Akinsete recommends Builders Trust Capital Oct. 2020
Photo of Kristian Latham

Just finished up my first project with the Builders Trust Capital team and wanted to share my appreciation for the good business. Success is often driven by effective relationships, and Builders Trust Capital’s partnership assisted me in strengthening my team all around. The process from beginning to end was smooth and efficient. They are a great partner to have to create opportunities for rookie and veteran investors.

Kristian Latham recommends Builders Trust Capital Aug. 2020
Photo of Timothy Rosenblum

Builders Trust Capital lives up to its name. They have truly been a partner to me with my projects. The process from underwriting to construction inspections has never wavered from their initial promise and Ive always been met with professionalism and efficiency. Rare in this space.

Timothy Rosenblum recommends Builders Trust Capital Apr. 2021
Photo of Mike Bonadies

Builders Trust Capital is an incredibly responsive and flexible lender for RE investors. They have been able to work with my unique situations and helped us close on properties no one else could. They know their local area well and can offer guidance. I highly suggest them.

Mike Bonadies recommends Builders Trust Capital Apr. 2021

Ready to discuss your funding needs?

Just contact us by phone 856-422-3232. If you prefer, send us a message and we’ll contact you shortly. Let's get started working together.

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